South Asia Watch on Trade, Economics & Environment (SAWTEE)

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Dropping of TGP agreement: A boon in disguise
Published: The Kathmandu Post, 17 August 2004
By: Elen Shrestha

Browsing through any recent news in the international business front, one cannot miss the sheer enthusiasm generated by the agreement of World Trade Organisation’s (WTO) members on 31 July, 2004, on framework package, which has put the Doha Round negotiations back on track. This is in contrast to the miserable failure of the fifth WTO Ministerial Conference held in Cancun, Mexico, which was a manifestation of the ever-growing chasm between the leaders of the developed nations and the developing economies. In Nepali context, however, Cancun Ministerial marked its accession as the 147th member into this “rule-based, member-driven organisation” working towards the goal of facilitating world trade in the true spirit of multilateralism. Singapore issues, inclusive of four elements namely investment, competition policy, transparency in government procurement (TGP) and trade facilitation, among others, were responsible for the derailment of the ministerial. However in Geneva, all but one Singapore Issue - trade facilitation - have been dropped.

Analysis of Organisation for Economic Cooperation and Development (OECD) indicates that government expenditure by OECD member countries, excluding military spending and state employees’ compensations, tended to be around US $ 2 trillion in 1998 while that of 106 non-OECD members, which comprises 90 percent of GDP of the developing world, was just under US $ 0.3 trillion. Thus, it is undeniable that the government procurement worldwide is of huge size and great value. In the face of its significance, WTO Government Procurement Agreement (GPA) came into force on 1 January 1996 on a plurialteral basis, making it binding only to its signatories. GPA is different from TGP Agreement which is structured within the multilateral framework and proposed by the economic giants like European Union (EU), Japan, United States (US) and the others. As for now this issue has been dropped, as one of the General Council’s decisions on Doha Agenda work program has been “no work towards negotiations on it within the WTO during the Doha Round.”

TGP Agreement was being publicised as a mechanism that would infuse an environment of non-discrimination that is conducive to open and efficient competition by the developed countries. On a superficial level, TGP Agreement appears to be a win-win situation for all the member states regardless of their economic standing. The implication of such an agreement is that in the light of disclosure of all information pertinent to the specific contract, all bidders, domestic and foreign alike, would be highly encouraged to participate. This would result in cost-effective projects ensuring “value for money” and production of goods and services of better and enhanced quality. Moreover, transparency would mean stifling corruption and enhancing confidence, which are the basic frameworks for good governance and sustainable development. Thus, theoretically speaking, beneficiaries of TGP Agreement are not just contract winners but also government and local citizens.

So why was there an absolute aversion towards the TGP Agreement by the developing nations, which ultimately has resulted in it being dropped from the negotiating table? The divergence of opinion between the developed nations and the developing world can be attributed to disparity in terms of their economic status. At the present circumstance, multilateralisation of TGP agreement would have been comparable to “Trojan Horse” in the perspective of the developing nations. The scenario would be such that the potential benefits from the agreement would be limited to the developed countries because of their technical superiority. One cannot say that the case would have been different for Nepal. Even with the advent of the twenty-first century, Nepal still remains one of the poorest nations of the world with approximately 40 percent of the population living in abject poverty. Moreover, terrorism threats, political instability, in fact civil war incognito have contributed to deterioration of economic facet of the country to such an extent that the economy is in shambles. The embryonic stage of technological advancement, which Nepal is in, has been further aggravated by the political predicament of the nation. This would have acted as an ultimate impediment to gain from TGP Agreement.

Moreover, why would any developing nation favour TGP agreement when their capacity to supply goods for government procurement in developed countries is limited? Even if they had supply capability in some areas, their efforts would have been thwarted by the procedural problems. The opportunity provided to the developing nations to participate in tenders for supply of goods for government procurement in the developed countries would have been futile, making the benefits of TGP non-existent. The issue of TGP Agreement had become contentious also because of the ulterior motives of the developed nations; their intention to use this as an initial or interim step to enhance market access of their entities in the area of government procurement had been quite evident. The developing nations were speculative also because the probable risk of restriction that they could face in making policies that would develop and support their small and medium-sized enterprises was too high to be overlooked.

Thus, speaking in terms of Nepal, to embrace the TGP Agreement would have been suicidal as the need of the hour seems to be to revitalise and motivate the domestic suppliers to become active contributors for the national economy. The unfeasibility of TGP Agreement in the context of Nepal can be further emphasised by the imperative need for enhanced technical calibre and implementation of new rules and regulation in accordance with Transparency Agreement. This would mean that our scarce resources would have to be reallocated, thus stalling and further delaying important programs related to poverty- alleviation, literacy, and health and so on. Thus, the failure of TGP Agreement to materialise at least in the near future is a boon in disguise for the country in regard to the considerable cost required for implementation and capacity-building.

There is a need to end the widespread political instability so that the socio-economic concerns of the nation could be addressed properly. It is indeed a breakthrough for Nepal that TGP Agreement has been dropped but we should work for a peaceful ambience that engenders technical enhancement making us more prepared as a nation to benefit from Transparency Agreement if it ever sees the light of the day.

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